Offshore wind in tender environment - Matthew Taylor 9 May 2019 - 6th Asia Offshore Wind Day in Seoul - Asia Wind Energy Association
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Offshore wind in tender environment Matthew Taylor 9 May 2019 – 6th Asia Offshore Wind Day in Seoul
Offshore wind in tender environment Table of contents 1. Green Giraffe introduction 2. How offshore tender structures compare 3. Tender strategy techniques 2 CONFIDENTIAL
1. Green Giraffe introduction
We get deals done
Deep roots in renewable energy finance Close to EUR 25 billion
• Launched in 2010 by experienced finance specialists with a funding raised for renewable
strong and proven track record in renewable energy
energy projects in 9 years
• 85+ professionals with offices in Boston (USA), Cape Town
(South Africa), Hamburg (Germany), London (UK), Paris
(France), and Utrecht (the Netherlands)
• Multi-disciplinary skillset including project & corporate
85+ professionals in
finance, M&A, tendering, contracting, and legal expertise
6 countries on 3 continents
High-quality, specialised advisory services
• Focus on projects where we can actually add value
• We can provide a holistic approach and are able to include
sector-specific tasks in addition to traditional debt or M&A
advisory (such as contracting, tender advice, strategic
Involved in over 150 renewable
advisory, and development services) energy transactions or
• Widening geographical reach beyond Europe, with a projects with a total capacity of
growing presence in the Americas, Africa, and Asia circa 35 GW
• Priority given to getting the deal done!
3 CONFIDENTIAL
1. Green Giraffe introduction
Green Giraffe has been involved in circa 35 GW of renewable energy projects globally
Europe
29,300 MW
Asia Pacific
1,950 MW
Americas Africa
2,240 MW 730 MW
Green Giraffe office
Future Green Giraffe office Countries in which Green Giraffe is or has been active
Capacity shown corresponds to renewable energy projects we have worked on, as of Q1 2019
4 CONFIDENTIAL
1. Green Giraffe introduction
Our expertise in Asia Visible value added
Long-term connection with Asia Pacific Helping lead the way with new offshore wind opportunities
• Some of our key employees have worked in China, Japan • Several countries in Asia Pacific (Taiwan, Japan, Korea)
and Singapore for a combined total of 20 years have ambitious plans to develop offshore wind, a sector
where we are market leader worldwide
• Native Chinese and Japanese speakers in our teams
• Locally difficult conditions (deep waters, typhoons,
Growing focus on the continent nascent supply chain, etc.) mean innovative, sometimes
complex, structures are required to ensure risk is
• Two debt projects closed in Australia in 2016 and 2017
managed accordingly; this is at the core of what we do:
• Several missions in Taiwan, winning the first offshore we are known for our multiple “firsts” in the sector
wind allocation (300 MW) and tender (744 MW), with NPI
• We structured the first financings in Europe with
and Yushan in 2018
multilaterals, international banks and local lenders all of
• Ongoing mandates in South Korea and Japan whom will be essential to the success of the sector
• Ongoing support to clients in Vietnam and India
Proactive setup to better serve the market
• Training sessions on project finance and offshore wind
organised in Taiwan to transfer knowledge to local banks • Dedicated teams specialised in Asian markets
• Opening of local offices under active consideration
• Regular participation in conferences and client meetings
Increasing experience in dealing with regulations, institutions and active players
5 CONFIDENTIAL
Offshore wind in tender environment Table of contents 1. Green Giraffe introduction 2. How offshore tender structures compare 3. Tender strategy techniques 6 CONFIDENTIAL
2. How offshore tender structures compare
The move to tenders has brought a spectacular drop in prices – and is linked to cost of capital
FR rd 1**
200
200
FR rd 2**
SDE*** 180
179
CfD rd 1***
162
Winning bid price* (EUR/MWh)
150
Horns rev 3
103
100
Borssele 1-2 CfD rd 2***
73 Danish nearshore 83
64 Borssele 3-4 DE tender
55 2***
50 47
Floor price, flat Kriegers Flak
Floor price, indexed 50
Fixed price, flat DE tender 1*** Hollandse Kust
4 Zuid 1-2
Fixed price, indexed 0
0
2009 2010 2011 2012 2013 2014 2015 04/2016 07/2016 10/2016 01/2017 04/2017 07/2017 10/2017 01/2018 04/2018
The vertical line corresponds to the range of prices allocated in a given auction
* Bid prices exclude interconnection costs
** Based on estimates made in public statements (bid results are confidential)
*** Based on weighted MW-average for all projects awarded
7 CONFIDENTIAL2. How offshore tender structures compare
Four key de-risking factors exist in the development phase
Offshore wind tender structure and evaluation method
Offshore lease Sea occupancy rights to develop, construct and operate an offshore wind farm
De-risking factors
Permits / early studies License to operate, construction permits, permits required for onshore construction etc.
Grid connection Grid connection rights; grid infrastructure may need to be built either by the project or by the grid operator
Revenue regime Revenue regime such as FiT, CfD or “green certificates” that enables pricing visibility over 10 to 20 years
Project is “shovel ready” once offshore lease, permits, tariff and grid connection are secured
8 CONFIDENTIAL2. How offshore tender structures compare
Bid evaluation methods in offshore wind tender
Offshore wind tender structure and evaluation method
Offshore lease Sea occupancy rights to develop, construct and operate an offshore wind farm
De-risking factors
Permits / early studies License to operate, construction permits, permits required for onshore construction etc.
Grid connection Grid connection rights; grid infrastructure may need to be built either by the project or by the grid operator
Revenue regime Revenue regime such as FiT, CfD or “green certificates” that enables pricing visibility over 10 to 20 years
Quantitative Mix Qualitative
Under “zero-bid” tenders
New entrants in offshore market
Bid evaluation focus shifts
Bid evaluation method Typically tenders without full Bid weighed by both quantitative
towards qualitative factors such
suite of de-risking packages (no and qualitative factors
as risk mitigation and
support on permits, feasibility
“deliverability” of the projects
study cost, grid connection etc.) E.g. France
E.g. Netherlands, Taiwan
E.g. UK, Taiwan (auction round)
allocation round
Various ways a tender is evaluated, but at some stage competence / capability is tested, so
having the lowest LCOE is not enough by itself
9 CONFIDENTIAL2. How offshore tender structures compare
Comparison of the main tender regimes – UK, DK, FR, DE, NL
Offshore wind tender structure and evaluation method
Offshore lease 2
De-risking factors
Permits / early studies 2
1
Grid connection
Revenue regime
Quantitative Mix Qualitative
Under “zero-bid” tenders
New entrants in offshore market
Bid evaluation focus shifts
Bid evaluation method Typically tenders without full Bid weighed by both quantitative
towards qualitative factors such
suite of de-risking packages (no and qualitative factors
as risk mitigation and
support on permits, feasibility
“deliverability” of the projects
study cost, grid connection etc.) E.g. France
E.g. Netherlands, Taiwan
E.g. UK, Taiwan (auction round)
allocation round
1. Denmark has previously included grid connection as part of TSO responsibility while for the upcoming auction, the Danish Energy Agency indicated that
the grid connection is to be included as part of the tender
2. For auctions held in 2017 and 2018, projects had been pre-developed by developers
Bid evaluation method determines your key battles to pick when forming a bid strategy
10 CONFIDENTIAL2. How offshore tender structures compare
Upcoming offshore wind auctions and its expected evaluation method
Offshore wind tender structure and evaluation method
2019 2020 2020
Offshore lease 2 3
De-risking factors
Permits / early studies 2
1
Grid connection
Revenue regime
Quantitative Mix Qualitative
Under “zero-bid” tenders
New entrants in offshore market
Bid evaluation focus shifts
Bid evaluation method Typically tenders without full Bid weighed by both quantitative
towards qualitative factors such
suite of de-risking packages (no and qualitative factors
as risk mitigation and
support on permits, feasibility
“deliverability” of the projects
study cost, grid connection etc.) E.g. France
E.g. Netherlands, Taiwan
E.g. UK, Taiwan (auction round)
allocation round
1. Denmark has previously included grid connection as part of TSO responsibility while for the upcoming auction, the Danish Energy Agency indicated that
the grid connection is to be included as part of the tender
2. For auctions held in 2017 and 2018, projects had been pre-developed by developers
3. Promotion zones selection is expected to be finalised in 2019 while competitive tender on the respective zones are planned in 2020
Taiwan, Japan, somewhere between the UK and France?
11 CONFIDENTIAL2. How offshore tender structures compare
Upcoming offshore wind auctions and its expected evaluation method
Offshore wind tender structure and evaluation method
2019 2020 2020
Offshore lease 2
De-risking factors
Permits / early studies 2
1
Grid connection
Revenue regime
Quantitative Mix Qualitative
Under “zero-bid” tenders
New entrants in offshore market
Bid evaluation focus shifts
Bid evaluation method Typically tenders without full Bid weighed by both quantitative
towards qualitative factors such
suite of de-risking packages (no and qualitative factors
as risk mitigation and
support on permits, feasibility
“deliverability” of the projects
study cost, grid connection etc.) E.g. France
E.g. Netherlands, Taiwan
E.g. UK, Taiwan (auction round)
allocation round
1. Denmark has previously included grid connection as part of TSO responsibility while for the upcoming auction, the Danish Energy Agency indicated that
the grid connection is to be included as part of the tender
2. For auctions held in 2017 and 2018, projects had been pre-developed by developers
3. Promotion zones selection is expected to be finalised in 2019 while competitive tender on the respective zones are planned in 2020
Taiwan, Japan, somewhere between the UK and France?
12 CONFIDENTIALOffshore wind in tender environment Table of contents 1. Green Giraffe introduction 2. How offshore tender structures compare 3. Tender strategy techniques 13 CONFIDENTIAL
3. Tender strategy techniques
Strategic considerations Other key development aspects
Approach: “trust yourself / the market” or “de-risk” Design / engineering
• Do you take a view on the market / your capabilities or • Links to procurement but also auction structure
do more structuring in advance to reduce risk later • A more centralised auction, with parties bidding for the
• De-risking also needs to be considered in light of auction same zone might mean you can get away with less
structure; evaluation points, bonds, bid budget etc. design than otherwise
Partnering Finance / investment
• Do you need the skills or other attributes (eg finance) a • Take FID already?
partner would bring or are you strong enough alone • How far to progress any debt financing
• Probably explicitly more valuable in a mixed evaluation • We find lenders are very open to support credible
criteria to compensate for your weaknesses bidders, though not on an exclusive basis so ethical walls
• Less obvious in a quantitative environment (UK) but risk might be relevant
and knowledge sharing may help you lower LCOE
[Off-take]
Procurement • Relevant in some contexts, especially zero-bid
• Early procurement can reduce risk but do you forego • But also in tariff regimes where a separate route to
potential upside? market is needed in any case (most jurisdictions)
• Experience / proximity of contractors
• Local content rules (definitely relevant in Taiwan)
14 CONFIDENTIALDebt M&A Strategic Contracting
BOSTON • CAPE TOWN • HAMBURG • LONDON • PARIS • UTRECHT
green-giraffe.eu
Offshore wind Onshore wind Solar power Other renewables
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